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United Airlines worries travel recovery will stall until there's a COVID vaccine

July 22 2020
6 min read
United Airlines worries travel recovery will stall until there's a COVID vaccine
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United Airlines is hedging its bets on the recovery from the coronavirus pandemic, which CEO Scott Kirby described as the "sharpest, deepest drop in the industry’s history."

The Chicago-based carrier expects travelers to keep returning to about half their 2019 numbers before plateauing until there is a vaccine for COVID-19, United commercial chief Andrew Nocella added during a second-quarter earnings call on Wednesday.

But travelers eager to fly the friendly skies to Hawaii or Rome best not get their hopes up for a speedy return. United does not expect a vaccine to be widely available until at least "late next year" — or the end of 2021 — said Kirby.

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In other words, United is likely be about half its 2019 size for the next 18 months. Even to get to that level, however, United still must add back flights from where it is today, with business currently down 83%.

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United aimed to show Wall Street that it has a handle on the crisis during its presentation Wednesday. Executives did not offer any surprises or drama in their commentary on a quarter when the airline lost $1.6 billion before special items. Their only jab at the competition was in making the claim that the carrier outperformed peers with a smaller loss.

The narrative painted was much like the one outlined by Delta Air Lines executives a week ago. Leisure travelers had been increasingly returning to the skies, whether to go to the beach or visit family. But that changed toward the end of June, when the resurgence of COVID-19 infections stalled the recovery. Bookings have not recovered and United remains bearish on August travel.

Loyal frequent flyers are returning in small numbers, said Nocella. However, they are flying for holidays and not on the business trips that are more lucrative to airlines.

"We are social creatures," he said.

Related: United Airlines loses ‘just’ $1.6B thanks to steep second-quarter cost cuts

United travelers should not be on the look out for any passenger-facing changes beyond safety protocols to prevent the spread of COVID-19 for the foreseeable future. The airline has suspended all non-essential spending and, during the second quarter, deferred all new aircraft due in 2022 to later dates.

At the end of March, the airline was due to take delivery of 16 new Boeing 787s — its new long-haul "workhorse" — through the end of 2021. All of these jets were at a point in production that United chief financial officer Gerry Laderman said in April would be “financially impractical” to reschedule.

"We have plenty of time, measured in years" to decide on aircraft retirements, Laderman said Wednesday in response to questions.

Related: United Airlines sees Boeing 787 as new long-haul ‘workhorse'

 

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United has only retired the 11 Boeing 757-200s in its “premium” transcontinental service configuration with 28 business-class seats, Nocella said. The 757s were previously said to be in long-term storage. In addition, United has more than 600 jets rotating through storage that it can retire at a later date.

United executives had no updates on the possible furlough notices sent to nearly 36,000 staff earlier in July. Roughly 6,000 employees have taken early departure packages with another more than 20,000 opting for unpaid time off.

“I think we’ll look back on the second quarter of 2020 as an extraordinary three-month period," said Kirby about the period that would have seemed unimaginable just six short months ago.

Related: United scales back August schedule on resurgent coronavirus, travel restrictions

Featured photo by United Airlines tails at Denver International Airport. (Photo courtesy of Denver International Airport)

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